Two Newbies Take on Cisco and Broadcom

Cloud computing, along with artificial intelligence, is one of the greatest technological changes in more than a decade, and it continues to send shock waves through the computer industry.

The latest segment to find itself suddenly turned inside-out is networking, a conservative area of tech that for years proceeded slowly and cautiously. A couple of firms dominate:
Cisco Systems
(ticker: CSCO), which sells the vast majority of the world’s networking equipment, and
Broadcom
(AVGO), which sells the vast majority of the computer chips that power networking gear. Their dominance, many in Silicon Valley believe, has held back networking. Now, two start-ups are challenging Broadcom and the status quo.

Disruption is coming. As more corporations connect to cloud-computing data centers, the network technology they want to deploy inside their offices must change from what it’s been for decades.

The article on
Arista Networks
(ANET) on page 15 describes how that push is giving that company an opportunity to battle Cisco in the so-called campus network, the backbone that connects corporate PCs and servers.

But the cloud will also affect Broadcom’s chip market. Broadcom sells upward of 95% of “merchant” network switch silicon—chips broadly available to all equipment makers, according to market research firm Dell’Oro. That’s worth as much as $3 billion annually to the company, or 17% of its $17.6 billion in revenue last year.

One of the emboldened start-ups is Innovium, which sits on a bluff overlooking the San Francisco Bay, not far from Arista’s headquarters. It has received $160 million in financing in four rounds from a number of venture capital firms, including storied Greylock Partners.

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This company is staffed by tech vets. Its chief, Rajiv Khemani, was chief operating officer at
Cavium
(CAVM), a chip maker that long has been in the networking market, and that is being acquired by
Marvell Technology Group
(MRVL).

Innovium chips are being designed into switches this year. In the past, many companies tried to be an alternative to Broadcom, Khemani notes: “They have come out with things on paper, but they never got to shipping silicon.”

Innovium’s co-founders, Mohammed Issa, who heads engineering, and Puneet Agarwal, who is chief technologist, worked together at Broadcom developing Tomahawk, the most advanced switch chip sold by that company.

They are now building a rival chip, Teralynx, which they contend is the only one that can go head-to-head with Tomahawk at moving packets of data at the top speed available—12.8 trillion bits per second. It also uses less power than Tomahawk, they say, and has lower latency—the average time it takes the first bit in a sequence to go from point A to point B.

But most important, the marketplace wants alternatives. “If I build my whole network on one chip, and I find out after a year of using it that there is something wrong with that chip, then what am I going to do” if there is no other option? Khemani asks rhetorically.

A more dramatic shift is underway at the second start-up, Barefoot Networks, in the next town, Santa Clara.

Co-founder Nick McKeown is a Stanford University professor of computer science, and a founder of networking outfit Nicira, which was bought by
VMware
(VMW) for $1.26 billion in 2012. CEO Craig Barratt is formerly a senior vice president at
Alphabet’s
(GOOGL) Google and president at Qualcomm Atheros, a unit of chip maker
Qualcomm
(QCOM).

Barratt told Barron’s last week that networking technology hasn’t evolved fast enough. “It’s all been done in [Broadcom] hardware,” he observes. “That has worked well, but it has also completely stifled innovation.” Unlike Broadcom’s chips, Barefoot’s parts contain few circuits specific to networking. Instead, they feature “primitives,” basic operations that can move bits of data at very fast speeds generally. On top of that, Barefoot offers a software programming language, called P4, that equipment makers, such as Arista or Cisco, can use to design anything they want.

Barratt makes an analogy to graphics chip maker
Nvidia
(NVDA). Although Nvidia started out making chips for video gaming, over time it developed a software language that has now made it possible to use its chips for many more tasks, including controlling self-driving cars and enabling machine language programming.

Programmable network chips open up a world of possibilities, argues Barratt. The network could, for example, take over from server computers some of the tasks of performing machine learning and artificial intelligence.
Goldman Sachs,
which has invested in Barefoot, is developing applications on Barefoot’s chips.

As always with small outfits facing large incumbents, the question is whether Innovium and Barefoot Networks can go 15 rounds against their formidable opponent. Innovium’s Khemani points to his old employer, Cavium, which evolved into a multibillion-dollar operation. Barefoot’s Barratt likes the analogy with Nvidia, which went from humble graphics-chip vendor to $155 billion powerhouse by diversifying into many markets.

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